Cyprus capital controls could be lifted in a month

March 29, 2013

NICOSIA, Cyprus - There were long lines of anxious people but no sign of trouble as banks in Cyprus opened Thursday for the first time in nearly two weeks, following an international bailout that sought to prevent the country from financial ruin.

The government has imposed a daily limit on how much people can withdraw to stop a run on its banks - the first such action in the 14-year history of the euro currency. Cypriots took the measure in their stride, aware that with their economy teetering on the edge of collapse, any undue panic would make the situation worse.

"Everything has been paralyzed. Besides my business being already low, now no one thinks of buying flowers," said flower shop owner Christos Papamichael who was among about 30 people waiting patiently for bank doors to open.

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AP PHOTOPeople wait outside a branch of Laiki Bank in Nicosia, Thursday. Banks in Cyprus reopened to customers for the first time in nearly two weeks Thursday, albeit with strict restrictions on transactions, after being closed to prevent people withdrawing all their savings during the country’s acute financial crisis. Large lines had formed outside the banks ahead of the opening of banks for six hours from noon.

"People think of anything (else) besides flowers, they've got other priorities. But now there's a half an hour delay and we're just waiting here."

The limits on transactions, have been imposed initially for seven days and are being reviewed daily. According to Central Bank assessments, the restrictions are to be fully lifted in a month, Foreign Minister Ioannis Kasoulides said.

"Gradually, probably in a period of a month, or something according again to the estimates of the Central Bank and according to the developments, the restrictions will be fully lifted," he said.

"If there (are) withdrawals from the banks, they may happen, but let me tell you once again there will be no bank run."

Guards from private security firms reinforced police outside some ATMs and banks in the capital, Nicosia, but no problems controlling crowds was reported.

President Nicos Anastasiades expressed his "warm gratitude and deep appreciation towards the Cypriot people for the maturity and spirit of responsibility they have shown at a critical time for the stability of the Cypriot economy," a statement from his office said.

However, many Cypriots were left frustrated and confused by the closures and controls and concerned about the effect on their businesses and livelihoods.

"No matter how much information there was, things were changing all the time," said Costas Kyprianides, a grocery supplier in Nicosia.

Banks have been shut in Cyprus since March 16 to prevent people from draining their accounts as politicians scrambled to come up with a plan to allow the country to qualify for 10 billion euros ($12.9 billion) in international bailout loans for its stricken financial sector.

A deal was finally reached in Brussels with other euro countries and the International Monetary Fund early Monday. The country's second-largest bank, Laiki, is to be split up, with its healthy assets being absorbed into the Bank of Cyprus. Savers with more 100,000 euros ($129,000) in either Bank of Cyprus and Laiki will face big losses. At Laiki, those could reach as much as 80 percent of amounts above the 100,000 insured limit; those at Bank of Cyprus are expected to be much lower.